NYC Insurance Blog

How to Insure an Investment Property

Property investment can be overwhelming sometimes. Even the most seasoned investors take a lot of time to consider their business, especially if they are into real estate.

Now, you want to buy some property. First, congratulations are in order. Second, you need to make proper arrangements to avoid the risks of buying property. You need an excellent strategy to ensure that your investment property is not a flop.

Now, you can start your journey in investment property by getting the right insurance. But before we can proceed, what is investment property insurance, and how does it work? Most importantly, what kind of insurance would you need for your property?

What is Investment Property Insurance?

When you buy a property, you pull your resources, hoping to flip or rent it for a profit. However, the industry comes with some serious risks of financial loss. If you do not prepare for these, you may end up losing your money.

That is where investment property insurance comes from. Now, what is investment property insurance?

Investment property insurance is a policy cover you take to protect yourself against financial loss in case of accidents, subsidence, and fires. The insurance covers the cost of rebuilding properties in case of the events under the cover happen. 

An investment property insurance policy covers any loss from damages and financial loss you may incur following a claim if you own a rental property. 

Taking up an investment property cover gives you peace of mind and protects your assets as the property owner. Give our Agency a call today! We can give you a Free Quote!

Types of Investment Property Insurance

No one insurance policy covers all investment properties. The type of cover you can take for your investment property will depend on the size of the property and the tenants you have. 

This investment property insurance guide will consider different scenarios and the types of insurance covers you may need for each. 

A small, tenant-occupied home

If you have a single or two-unit property and decide to rent it, you will need to invest in a dwelling fire policy. This insurance policy caters to the risks of rental property. It includes coverages like:

• Dwelling, which protects the actual structure
• Other structures, like yards or garages not attached to the property
• Personal property, which covers any personal items on the property subject to deductibles
• Medical payments to others in case of injuries caused on your property
• Personal liability for legal expenses when someone sues you due to injuries that occurred on your property
• Fair rental value to reimburse the rental income you lose in case of disasters, but to a certain cap

In addition to these main coverages, you may pay an extra premium for additional covers like equipment breakdown and service line coverages. 

However, you should note that the coverages only apply to you, the owner of the property, and not tenants. If the tenants need coverage, they should take up their insurance with their insurance companies or plan with your insurance company, for rental insurance.

This type of insurance coverage can range in price, depending on the size of your property, the location, and the dwelling limits.

Insuring a vacant property

In this case, the property is not vacant due to scheduled renovations. Instead, the property remains vacant for an uncertain period, the investment property insurance policy to take up is an Unoccupied or Vacant home policy.

This insurance cover protects property owners from property loss and other valuable items from their property due to vandalism. 

The Vacant home policy has less coverage than a standard homeowners insurance policy. However, it includes coverages like:

1. Dwelling to protect the structure of your home
2. Liability coverage to cover any legal fees arising from cases of injuries happening on your property.

However, because of the higher risks your vacant property faces, the premiums for this insurance cover are around 50% higher than other home insurance policies. 

Insuring a vacant property under renovation

For this case, you will need a builder’s risk policy. This is an individualized type of insurance taken specially for buildings under construction. It protects your property and yourself from any financial loss you may incur in case of damages, loss of project materials, and the structure.

Usually, the builder’s risk policy is 1-4% of the total construction cost. Not sure what your investment property qualifies as? Call us, allow us to asses your insurance needs!

Insuring a property with multiple units

When you have more than 4 units under your name, you should consider taking a commercial insurance policy rather than a personal insurance policy. This is because the insurance companies see multiple units as income generators for the property owners.

The commercial insurance policy offers general liability and property coverage.

Commercial property insurance protects the property and its owners from financial loss from damages on the property. It includes coverage like:

• Dwelling to cover the actual structures in case of damages
• Personal property to cover any private items on the property 
• Loss or rent cover for when you cannot find tenants for some time. This could be due to natural events rendering your property inhabitable

Homeowners also need general liability insurance to cover claims made against the business. The cover caters to legal fees, settlements, or medical expenses arising from injuries that happen on your property.

If you are a victim of slander, defamation, or claims filed by your employees, the general liability cover will help you settle this. 

Other cases covered by the general liability insurance include:

• Injuries to third-parties
• Damage to someone’s property
• Contractual liability
• Electronic data liability
• Claims made by employees, etc

Bottom Line

Insuring your investment property is the best way to protect it from any unforeseen damages, more so, if you’re not living in the property itself. Therefore, it’s critical to look for an insurer with a policy that can cover you at all times. Besides, your property should be generating money, not losing it. So, if you need to take up an insurance policy to protect yourself from the possibility of financial loss, it is the best option for you. There are different plans to suit different situations NYC Business Group, is here to help with finding the best coverage for you!

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